Nothing comes free in life, but life insurance policies can be provided for free sometimes. Most employers in Canada provide their workers with basic group life insurance as part of their employee benefits package. The employer usually pays up to half or all of the premiums.
Signing up for work life insurance is a no-brainer. You get coverage for your spouse, kids, and dependents at little or no cost. However, there are things you need to consider.
Is work life insurance enough? Will it provide sufficient coverage for my family? Can I rely entirely on my work life insurance? Do I need to get supplemental life insurance?
Getting life insurance through your job may seem like the best option. But there are pros and cons that you need to consider before making your decision.
Continue reading to find out more.
Is Work Life Insurance Enough?
Work life insurance is a form of group life insurance offered by employers as a part of your employee benefits package. A work life insurance provides your family with financial benefits if you die.
Work life insurance is cheaper than having individual life insurance. Your employer typically pays most or all of the life insurance premiums.
You simply have to sign up under your organization and get your work life insurance. Sometimes, the enrollment is automatic. You have to fill out all the required forms before the deadlines and ensure you name a beneficiary. If you don’t name a beneficiary, your death benefit goes to your estate, or spouse, as determined by the law.
Providing work life insurance to employees is not mandatory. It is optional for employers in Canada. Most Canadian employers offer work life insurance to attract and retain talent.
Work life insurance policy typically has low coverage. It ranges from $25,000 to a multiple of one or two-year salaries. It might not offer enough coverage if you have a spouse, children, and dependents you want to leave financially secured if you die.
If you just graduated from college, are still single, and have no debts or dependents, work life insurance might be enough. Most times, it’s still not enough.
Most Canadian employers offer a one-time salary. Generous employers offer up to two or three times free work life insurance benefits. But, this is still not enough. Financial experts and insurance advisors advise that you take at least six times your annual income as life insurance coverage.
Benefits of Work Life Insurance
Work life insurance is an attractive proposition. It comes with a handful of benefits you might not get with an individual life insurance plan. Let’s look at some of the benefits:
Convenience
Getting a life insurance policy through your job is relatively easy. Your employer pre-arranges the coverage, premiums, and available terms. You only have to sign up for the policy.
The paperwork is done along with your hiring documents, and the HR department handles all the questions. The application process for work life insurance is usually shorter than for individual life insurance.
Most time, when you are required to pay part of the premium, your premiums are automatically deducted from your salary. You don’t have to worry about missing any premiums and risk your policy lapsing.
Easy To Qualify
Most basic work life insurance policies are guaranteed. The screening process is relatively straightforward, less time-consuming, and less exhaustive.
Individual life insurance often requires underwriting and medical examination; work life insurance doesn’t include a physical exam. You only have to answer a few health-related questions when applying.
You can also buy supplemental life insurance to provide additional coverage for a set amount, using the health information you provided for your work life insurance.
Drawbacks of Work Life Insurance
Depending on your needs and career plans, work life insurance might not be the perfect fit. Here are some drawbacks of work life insurance that you should consider before making a choice.
Limited Coverage Amount
The death benefit of work life insurance is too small to cover your family’s needs. Though some employers in Canada offer more coverage than others, the general coverage amount is typically one to two years of your annual salary.
This coverage amount cannot be sufficient for an average family in Canada. Most employees frequently ask, “Is work life insurance enough?” “Should I get supplemental life insurance?”
The honest answer is that work life insurance is insufficient, and employees should get supplemental life insurance. Supplemental life insurance is additional coverage that you can buy through your workplace.
While it is pretty impossible to determine the exact coverage your family would need after you pass away, the general rule of thumb is six to ten times your annual salary. The payout should be enough to pay off your debts, care for your family’s everyday needs and plan for their future.
Limited Coverage
Work life insurance is usually a type of term life insurance, and employers mostly have only one carrier. You can only get the life insurance policy that your employer offers. You won’t be able to apply for the wide range of options you might find outside work.
Lack of Control
Work life insurance is owned by your employer and not you. Your employer might decide to discontinue the policy as a benefit.
Further, work life insurance is one-size-fits-all. You cannot tweak them to meet your family’s unique needs.
Taxation
There may be tax implications on your work life insurance depending on how your employer structures it. While the payout of individual life insurance isn’t taxable, the payouts of work life insurance may be taxable.
Coverage is Tied To Your Employer
Work life insurance is not portable. You can’t take the policy with you if you leave your job. You can’t stay with your employer forever, so this might pose a huge problem.
According to statistics from The Balance Careers, employees switch jobs every 4.3 years for men and 4.0 years for women and change jobs 12 times in their lifetime. So, when you change jobs, your coverage may also end with the job.
Your next employer might not offer life insurance, so you may have to take an individual life insurance policy to provide coverage for your family. You can convert your work life insurance to individual life insurance or buy a brand new life insurance policy.
What Happens If I Leave My Job?
If you leave your employer, you will likely lose your life insurance coverage. However, you can retain the policy by transferring it to your new employer or convert the group life insurance policy to an individual life insurance policy.
You can transfer your policy to your next employer only if your new employer offers work life insurance and uses the same insurance company as your previous employer.
Otherwise, you may have to consider conversion. Most work life insurance policies have a conversion privilege option, which allows employees to convert their work life insurance to an individual policy.
Once you convert, you have to pay the premiums yourself. The cost of conversion and the new premium may be significantly expensive. There’s a good chance that you might find a brand new individual life insurance policy at a better rate if you shop around.
Is My Family Covered Through My Work Life Insurance?
Yes. Your work life insurance policy lets you extend your coverage so you can include your family and loved ones. You can include your spouse and children who are below 21 years.
Final Thoughts On Is Work Life Insurance Enough
Work life insurance is convenient, and most times, it comes free of charge with guaranteed coverage. If your employer offers the policy, signing up for it would be worth it.
However, you should keep the drawbacks in mind. The payout is small, and you can control the policy. It would be best to get an individual life insurance policy.
You should speak with an insurance expert to see the best options before making a decision.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
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